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Spending lifts in August, but growth continues to slow

WA the only state to record weaker sales, the fourth decline in as many months

Economists expect spending to rise now that the federal election is over

20 September 2013: Economy-wide spending continued to rise across the month of August, but at the slowest pace in 11 months, according to the latest Commonwealth Bank Business Sales Indicator (BSI).

The BSI* is a key measure of economy-wide spending, tracking the value of credit and debit card transactions processed through Commonwealth Bank point-of-sale terminals.

According to the BSI, spending rose by 0.3 per cent in trend terms in August, the slowest growth rate experienced in 11 months, following growth of 0.4 per cent in July and 0.6 per cent in June. In annual terms, growth lifted from 7.1 per cent to 12.2 per cent in August.

The more volatile seasonally adjusted measure of sales increased by 3.0 per cent in August after dropping by 1.9 per cent in July and 2.4 per cent in June.

According to Adam Bennett, Executive General Manager, Local Business Banking, Commonwealth Bank, businesses should remain cautiously optimistic given the continued upward trend in spending.

“While consumers are becoming more reserved in their spending habits, we’ve still seen spending increases across many of the industries. What’s more, some of those industries that have experienced a decline in sales – such as Utilities – have been impacted by anomalies such as the unusually warm winter, rather than any long-term trends.

“Overall businesses should remain positive, particularly in light of the improvements in consumer confidence following the federal election, and given the continued upward trajectory in spending patterns over the past 12 months,” said Mr Bennett.

Craig James, Chief Economist at the Bank’s broking subsidiary CommSec and author of the BSI, said the results should be viewed in the context of the positive signs being seen in the wider economy.

“Although the latest figures show consumers are still wary about opening their wallets, the broader economic climate gives few reasons for people to be glum, with consumer confidence up post-election while both interest rates and unemployment remain at historically-low levels.

“Looking ahead, we expect to see a pick-up in spending over the medium term now that the federal election is behind us. Spending will be spurred on by the low interest rate environment, healthy house prices, new housing developments across the major capital cities and stronger sharemarkets,” said Mr James.

Industry Analysis – Amusement & Entertainment continues to see strong sales in August

The Amusement & Entertainment sector continued to see the strongest sales results, up 6.5 per cent in trend terms in August following a 6.0 per cent increase in July. Among the other strongly- performing sectors were Wholesale Distributors & Manufacturers (up by 2.0 per cent) and Automobiles & Vehicles (up 1.3 per cent).

Overall only five of the 19 industry sectors contracted in trend terms in August, with the biggest falls seen in the Utilities (down by 1.4 per cent), Business Services & Transportation (down 0.8 per cent) and Retail Stores (down 0.3 per cent) sectors.

State and Territory Analysis – WA growth continues to slow

Western Australia recorded the biggest monthly fall in sales in 27 months in August, down 0.3 per cent in trend terms, representing the fourth straight month of sales declines in the state.

All of the other states recorded monthly increases with sales in South Australia rising the most (up 1.3 per cent), followed by Tasmania (up 1.1 per cent), Australian Capital Territory (up 0.9 per cent), Queensland and Northern Territory (both up 0.5 per cent), New South Wales (up 0.3 per cent) and Victoria (up 0.2 per cent).

In annual terms, no state or territory has sales below a year ago. The strongest growth was posted in Australian Capital Territory (up 16.4 per cent), followed by South Australia (up 14.6 per cent), New South Wales (up 10.3 per cent) and Tasmania (up 9.9 per cent)..

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For media inquiries please contact:

Kathryn Powditch
Commonwealth Bank
02 9303 1353

Note to editors

The Commonwealth Bank Business Sales Indicator is calculated by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities throughout Australia.

The Business Sales Indicator has been devised to provide a monthly assessment of spending trends in the Australian economy (covering 19 industry sectors and all Australian states and territories) and is available to the public on the Bank’s website and to the media on or around the 20th day of each month.

Credit and debit card transactions can be volatile on a month-to-month basis, affected by seasonal and irregular factors. The Business Sales Indicator is tracked in seasonally adjusted and trend terms. The overall Index is measured in both seasonally adjusted and trend terms while state and industry data are measured using the less volatile “trend” approach. The seasonally adjusted and trend estimates of the BSI results are derived via the SEASABS statistical program from the Australian Bureau of Statistics.

The monthly Business Sales Indicator has been devised to provide a more timely assessment of spending trends in the economy. The main monthly indicator of spending in the economy is the Australian Bureau of Statistics’ (ABS) Retail Trade release. However these statistics cover just spending at retail establishments, and exclude spending at a raft of other businesses.

The Business Sales Indicator includes transactions made at traditional retail establishments such as supermarkets, clothing stores and cafes & restaurants and as such is more comparable to the ABS Household Final Consumption Expenditure released on a quarterly basis. The Business Sales Indicator also covers businesses such as airlines, car dealers and utilities such as water and electricity companies as well as motels, business, professional and government services and wholesalers.

The Business Sales Indicator includes industry sectors based on the International Merchant Category Code (MCC) categories. MCC is a four-digit number assigned to a business when the business first starts accepting cards as a form of payment..